New Signs of Pricing Power: Paper

An employee walks near a roll of paper at the Nippon Paper Industries Co. Ishinomaki Mill, March 9, 2012.

In the ongoing battle against deflation, Japan’s economic policymakers have won staunch allies among the country’s paper makers, who in recent months have become some of the nation’s most enthusiastic price-hikers, citing the pinch of higher import costs due to the weaker yen.

Just five months after lifting prices by roughly 15% for paper used for commercial purposes such as flyers, catalogues and publications, the makers are seeking another 10% increase for those products starting Oct. 21. In addition, the companies now want to apply that 10% increase to copying paper for home and office use, products that had been spared the summer bump.

“The previous increase was to bring the price back to a sustainable level as it fell to an unprofitable level last fall due to increased competition from cheap imports,” Koji Yoshino, spokesman for Nippon Paper Industries Co., told JRT. The paper maker holds a 30% market share in the printing paper category, which excludes products used for newspapers.

“We are hopeful that our customers will understand why we need to raise the price,” Mr. Yoshino added. “We can no longer bear the cost as the dollar rose from last year’s below ¥80 to the current near ¥100 level.”

The moves comes as core consumer prices have risen now for three months in a row, raising hopes that Japan’s long bout of deflation — a spiral of falling prices and wages — may be coming to an end. But most of the inflation has come from energy prices, so economists have been watching to see if manufacturers are now trying to pass on costs and flex their pricing muscles.

But there’s little evidence that price-hikers are passing the gains onto their workers anytime soon. The paper makers say they don’t have any such plans. “This price hike will not be used to raise wages,” Mr. Yoshino said.

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